Greatbatch, Concordia price, new bonds diverge; recent Frontier, Cablevision deals busily firmer

By Paul Deckelman and Paul A. Harris

New York, Oct. 20 – Tuesday was a busy – and usual - day in the high-yield primary arena.

Syndicate sources said that medical devices maker Greatbatch Ltd., as expected, came to market during the session with a $360 million scheduled forward calendar offering of eight-year notes.

However, a second pricing caught many in the market by surprise, as Canadian pharmaceuticals company Concordia Healthcare Corp. made an early-morning announcement that it had priced $790 million of seven-year notes – a deal that was on junk marketeers’ radar screens but which had not been expected to imminently price during the session.

Even more surprising – secondary traders said that Concordia’s new bonds dropped sharply in heavy trading that shot the new deal right to the top of the Most Actives list, while the company’s existing bonds moved up on active volume.

The new Greatbatch notes, meanwhile, showed solid aftermarket gains, though on only limited trading.

Concordia was not the only surprise seen in Tuesday’s market.

Industrial products manufacturer NN Inc. – another company whose prospective deal had been hanging around the forward calendar for some time with no indication that pricing was imminent– disclosed in a regulatory filing that it had priced $300 million of seven-year notes on Friday. Those new notes, however, were not seen trading around on Tuesday.

Among recently priced deal which were seen actively moving around on Tuesday, traders reported that the multi-part megadeals from wireline telecom provider Frontier Communications Corp. and from Neptune Finco Corp., the special-purpose vehicle issuing bonds to help finance European cable operator Altice NV’s pending acquisition of domestic sector peer Cablevision Systems Corp., were both seen firmer on the session.

Away from the new deals, Valeant Pharmaceuticals International, Inc.’s bonds may have temporarily escaped the downturn that the troubled Canadian drug maker’s shares saw on Monday after the company released earnings and outlined changes in its controversial operating strategy – but their luck ran out on Tuesday as the bonds were off across the board in active dealings, while its equity carnage only got worse.

Statistical measures of junk market performance turned mixed on Tuesday, after having been higher across the board Friday and then again on Monday. Tuesday was the second mixed session in the last four trading days, and on a somewhat longer timeframe, its fifth mixed session in the last 10.

Greatbatch prices

Tuesday’s session saw two issuers price single tranches of notes with an overall combined face value of $1.15 billion.

Only one of the two deals was conventionally placed, sources said.

Greatbatch priced a $360 million issue of eight-year senior notes (Caa1/B-) at par to yield 9 1/8%.

The yield printed 12.5 basis points beyond the wide end of the 8¾% to 9% yield talk.

However that talk had widened out while the deal was in the market, according to a trader who said that early guidance was 8% to 8½%.

Credit Suisse and KeyBanc were the joint bookrunners for the acquisition financing.

Concordia prices $790 million

Elsewhere dealers priced $790 million of Concordia Healthcare senior notes due 2022 at par to yield 9½%.

The bridge loan, which was capped at 9½%, was converted into bonds, sources said.

Subsequent to pricing, the bonds were sold to certain investors at a discount, a trader said.

The notes were trading actively on Tuesday morning, according to sources.

A trader said that the paper had been changing hands in the context of 96½ to 97½.

Goldman Sachs was the left bookrunner. Credit Suisse, Jefferies and RBC were the joint bookrunners for the acquisition financing.

Meanwhile the sole dollar-denominated deal on the active calendar is American Energy – Permian Basin, LLC's $560 million offering of five-year senior secured first-lien notes.

The market awaits official price talk. However early guidance had the deal coming with a yield in the 9% area, a trader said.

That guidance appears to have been overtaken by events, a market source said on Tuesday.

The American Energy – Permian Basin 8% second-lien senior secured notes due June 15, 2020 were trading around 87 bid on Tuesday morning, the source said, adding that the implied yield was 11½%.

Those second-lien notes dropped another couple of points during the Tuesday session, a trader said, spotting them in the context of 85¼ bid to 85½ bid.

Meanwhile American Energy – Permian Basin’s unsecured paper – the AEPB Finance Corp. 7 3/8% senior notes due Nov. 1, 2021 – was also down a couple of points, wrapped around 57, at Tuesday’s close.

These trading levels suggest that the company is in a process of price discovery with its new offering of five-year senior secured first-lien notes, sources say.

The deal is set to price in the mid-week period.

Goldman Sachs is the left bookrunner. Jefferies and BofA Merrill Lynch are joint bookrunners.

Ence roadshow for Wednesday

In the European market, Madrid-based Ence Energia y Celulosa, SA plans to start a roadshow on Wednesday for a €250 million offering of seven-year senior notes (Ba3/BB-).

The roadshow wraps up Friday and the deal is set to price thereafter.

Global coordinator JPMorgan will bill and deliver.

BBVA, CaixaBank and Santander are active bookrunners.

Bankia, Citigroup, Sabadell and Bankinter are bookrunners

The pulp producer plans to use the proceeds to redeem all of its 7¼% senior notes due 2020.

Ence’s deal is one of two euro-denominated deals currently in the market.

Verisure Holding AB is roadshowing a €700 million offering of seven-year senior secured notes (B1/B).

The roadshow wraps up on Wednesday and the deal is set to price subsequently.

Joint global coordinator Goldman Sachs will bill and deliver. Morgan Stanley, BofA Merrill Lynch, Nomura and Nordea are also global coordinators.

Barclays, Citigroup, Credit Suisse and Deutsche Bank are joint bookrunners.

Great start for Greatbatch

In the secondary market, traders said that the new 9 1/8% notes due 2023 from Frisco, Texas-based medical devices manufacturer Greatbatch were doing well after that $360 million regularly scheduled forward calendar issue priced at par.

One trader saw the new notes trading between 101¼ and 101½ bid. But he said that “it doesn’t look like a lot traded – there were only a handful of prints.”

A second trader also saw those bonds last printing in the 101¼ to 101½ bid area, after having moved around earlier between 100½ and 101½.

At yet another shop, a market source pegged the new bonds between 100½ and 101¾ bid.

New Concordias clobbered

Tuesday’s other new deal – Concordia Healthcare’s 9½% notes due 2022 – got quite a difference reception when it hit the aftermarket.

A trader said that the Oakville, Ont.-based biotech company’s new deal “was one of the big names that traded today,” with over $87 million of those notes having changed hands, making it the busiest purely junk-rated credit of the day.

He saw the bonds trading around the 96 bid level – well down from the par level at which that deal had priced earlier.

He opined that “this was a kind of broken deal, I think – a broken bridge loan. Goldman [Sachs, the left-side bookrunner] was on the hook for it, so they had to re-market it,” even if it meant selling the bonds at a deep discount.

“That’s what happens sometimes.”

A second trader saw those bonds “straddling” 96, and remarked “I don’t know what the heck happened there” to make those new bonds trade as low as they did.

He said that after the bonds’ pricing had been announced – which was the first that many market participants even heard that the pricing had taken place, since it had not been expected for Tuesday’s session – the bonds initially traded around 97½, before dropping back down to 96.

“That doesn’t make any sense,” a third trader said as he quoted the bonds gyrating around between 95 and 97¾, seeing a final print at 95¾.

He theorized that the underwriters “just stuffed the accounts,” making them take the paper – and those buyers, in turn, got out of it as soon as they could, pushing it down further.

“All the Canadian guys are probably just puking it up,” he graphically added.

Not helping matters, he further said, was the fact that “it’s biotech – what do you expect?”, given the recent woes in the biotech and pharmaceutical industries, with politicians in the United States including, but not limited to, presidential candidate Hillary Clinton loudly denouncing Big Pharma for alleged overpricing of many medications. Meanwhile, sector peer Valeant disclosed that it was on the receiving end of subpoenas from federal prosecutors in Boston and New York, seeking information about its pricing policies.

“Everyone is beating up on the biotechs.”

While the new bonds were heading downward, Concordia’s existing 7% notes due 2023 were heading in the opposite direction, with a market source locating those bonds at 85¾ bid, up 1 point on the day, on volume of more than $39 million.

A second trader called the latter bonds up 2 points on the day, around the 87 bid mark.

One of the traders noted that “the yield on the new bonds is higher than on the old ones” – about 10.4% on the new issue, versus about 9.75% on the established bonds.

However, he said, the older bonds “are trading about 7, 8 points or more cheaper – and people just love a discount.”

New NN not seen

The other new deal to surface during the day – the new 10¼% notes due 2022 from NN Inc., a Johnson City, Tenn.-based manufacturer of high precision metal bearing components and other precision metal components, as well as industrial plastic and rubber products – was not really a Tuesday deal at all.

The company disclosed in an 8-K form filed with the Securities and Exchange Commission that it had priced that $300 million scheduled forward calendar issue at par on Friday, with settlement taking place on Monday.

Some of the traders wondered why that deal – like the Concordia pricing – had come in pretty much under the radar with little or no fanfare, after having been on the calendar since mid-September and having originally been expected to price after its roadshow finished up on Sept. 28 and price talk emerged on Sept. 29.

They noted that the three-week delay was an indication that there probably had been some pushback from potential investors, with the company forced in the interim to restructure the deal into a five-year piece of paper from the originally planned eight-year issue.

And NN and its underwriters were eventually forced to do the deal to yield 10¼%, a full percentage point above the 9¼% price talk that had circulated back on Sept. 29.

Several traders said that they had seen no trace of those new bonds in Tuesday’s secondary market, with one declaring that “there’s nothing in that right now.”

A second trader surmised that with its relatively small size and hefty coupon north of 10%, “it just got put away.”

Another trader suggested that if the bonds were to trade he would quote them in 99½ to 100½ context.

Recent issues busy

Apart from the newly priced deals, one of the traders said that “some of these [recent] new issues were pretty active.”

He saw the Nefico/Cablevision 10 7/8% notes due 2025 up 1 point on the day, trading above the 106½ bid level.

Another trader saw those bonds at 106½, calling them up 3/8 point on volume of over $24 million.

The Nefico/Cablevision 10 1/8% notes due 2023 were up 7/8 point on the day at 105½ bid, with over $29 million traded.

Bethpage, N.Y.-based Cablevision and Luxembourg-based Altice brought $2 billion of the 10 7/8% notes, $1.8 billion of the 10 1/8% notes, both unsecured, and $1 billion of 6 5/8% senior guaranteed notes due 2025 to market, all at par on Sept. 25 in a scheduled forward calendar deal, downsized to $4.8 billion total from $6.3 billion originally and later, $5.3 billion, as part of the financing for Altice’s $17 billion acquisition of Cablevision.

The first trader also saw Frontier Communications’ 11% notes due 2025 up by more than 1 point on the day in active trading.

Another market source said they were up by 1 3/8 points to end at 103 5/8 bid, with over $44 million traded.

The Stamford, Conn.-based wireline telecom and internet provider’s 10½% notes due 2022 were seen up more than ½ point to end just under 103 7/8 bid, with over $40 million traded.

Frontier priced $3.6 billion of the 11% notes, $2 billion of the 10½% notes and $1 billion of 8 7/8% notes due 2020, all at par in a scheduled forward calendar deal on Sept. 11.

Valeant trades off

Away from the new deals, a trader said that “a name that was active yesterday [Monday] was active today [Tuesday] to the downside around 2 points” – Valeant Pharmaceuticals’ 6 1/8% notes due 2025.

Those bonds had firmed by about ¼ point on Monday to 96 bid, on brisk volume of more than $16 million., while its 5 7/8% notes due 2023 had done even better – up 9/16 point to 96¼ bid, with more than $18 million traded, even as the Laval, Quebec-based specialty pharmaceuticals company’s New York Stock Exchange-traded shares had plunged by nearly 8% on three times their normal volume.

But on Tuesday, another trader said, “the stock got clobbered again today, down 17 bucks to $146.”

He said the 6 1/8s were “down maybe 1½ points and were pretty active.” He saw them at 94½, down from 96 on Monday.

Yet another trader located those bonds at 94¾ bid Tuesday, down 1½ points, with over $35 million traded.

Valeant’s 7½% notes due 2021 were down 5/8 point, ending at 102 3/8 bid, with more than $16 million traded.

Indicators turn mixed

Statistical measures of junk market performance turned mixed on Tuesday, after having been higher across the board Friday and then again on Monday.

Tuesday’s session was the second mixed session in the last four trading days, and on a somewhat longer timeframe, its fifth mixed session in the last 10.

The KDP High Yield Daily Index put up its third successive gain on Tuesday, rising 5 basis points to close at 67.49, on top of Monday’s 9 bps firming and Friday’s 24 bps jump. Tuesday marked the index’s ninth gain in the last 11 sessions and its 10th in the last 13.

Its yield came in by 1 bp to close at 6.46%, after having tightened 3 bps on Monday and by 10 bps on Friday. It was the yield’s third straight narrowing, its ninth tightening in the last 11 sessions and its 10th tightening in the last 14.

However, the Markit Series 25 CDX North American High Yield Index suffered its first loss, of 5/32 point, after three straight days before that on the upside, including Monday’s 3/8 point rise. It was the index’s third loss in the last six sessions.

The Merrill Lynch North American Master II High Yield Index scored its third straight advance on Tuesday, finishing up by 0.236%. That followed gains of 0.278% on Friday and 0.11% on Monday.

Tuesday’s rise was also its ninth in the last 12 sessions and its 10th such improvement in the last 14 trading days.

The index’s year-to-date return remains in the red, but just barely, its cumulative loss sliced to 0.037% from 0.273% on Monday – both well down from the 3.069% year-to-date loss seen on Oct. 2, which was the most red ink for the year so far and the index’s lowest level since Oct. 5, 2011, when the market measure had shown a 3.834% year-to-date deficit.

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